Friday's Rates are Leaping Lower: 30 Year Back Under 6%

It's highly anticipated the Fed will cut rates at their next meeting on March 18, 2008.  Please don't delay your mortgage for this event: mortgage rates will very likely be higher.  The Fed controls the Fed Funds Rate and the Discount Rate: not mortgage rates.   Mortgage rates are based on mortgage backed securities (MBS): they are bonds that are traded.  Just like the stock market, the values changes constantly and therefore, so do mortgage interest rates.   Mortgage rates actually tend in increase after a Fed rate cut as the "cut" is viewed as an inflationary action.  Bonds react negatively to inflation.    When the Fed cut rates by 50 bps at their last meeting on January 30, 2008; MBS lost 269 bps in 13 days.   When the Fed made the unscheduled rate cut on January 22, 2008; MBS dropped 144 bps in just 2 days.  Are you noticing a trend here?  Please don't delay your refinance or home purchase based on the upcoming Fed meeting.  As we near mid-March, mortgage rates are very likely to increase.   HELOCs benefit from when the Fed cuts the Funds Rate (the Prime Rate is based on the Funds Rate)...your mortgage rate does not.

Update 3:00 p.m.:  Rates have improved slightly this afternoon...updated rates are posted at Rain City Guide.

Conforming Mortgage Rates (loan amounts up to $417,000 for 1-unit properties).  The conforming rate quote below is based on owner occupied, "full doc" purchase with minimum credit scores of 680 with an 80% loan to value or lower, a loan amount of $400,000, and with reserves (taxes & insurance) not being waived.   Rates quoted are priced based on a 45 day lock with 1 point and there are no prepayment penalties on any of the rates quoted below.   

30 Year Fixed: 5.750%.   (APR 6.021%).  Payment per $1000 = $5.84.

30 Year Fixed with 10 Year Interest Only:  6.00%  (APR 6.133%).  Payment per $1000  = $5.00.   Tip:  Check out the 10/1 Interest Only ARM  below if you are considering this product.  Both of these programs offer fixed rates for 10 years--the 10/1 ARM offers a lower rate by a full half point.

10/1 ARM Interest Only: 5.500% (APR 6.465%).  Payment per $1000 = $4.58.

10/1 ARM: 5.375% (APR 6.383%).  Payment per $1000 = $5.60.

15 Year Fixed: 4.875%% (APR 5.107%).  Payment per $1000 = $7.84.

7/1 ARM:  4.875% (APR 6.420%).  Payment per $1000 = $5.29.

5/1 ARM:  4.625% (APR 6.652%).  Payment per $1000 = $5.14

FHA/VA 30 Year Fixed:  5.875%% (APR 6.404%).  Payment per $1000 = $5.92.  (not including FHA mortgage insurance).

JUMBO (Non-Conforming) Rates.   Pricing is based on the same criteria above, with the exception that the loan amount is $417,001-$650,000 (20% down).

30 Year Fixed: 6.750% (APR 6.901%).  Payment per $1000 = $6.49.

10/1 ARM:  5.875%% (APR 6.656%).  Payment per $1000 = $5.92.

10/1 ARM Interest Only Payments: 6.625% (APR 7.164%).  Payment per $1000 = $5.52.

7/1 ARM Interest Only Payments:  6.375% (APR 7.203%).  Payment per $1000 = $5.31.

7/1 ARM:  5.375% (APR 6.668%).  Payment per $1000 = $5.60.

Prime Rate (what HELOCs are based on):  6.00%

Please do not select your Mortgage Professional by interest rates alone and do not shop rates by APR.  These programs all have the same closing costs so you can see APR is not a valuable tool.   If you were considering a conforming product that offered a 10 year fixed period with interest only payments and relied solely on APR, you would wind up choosing the mortgage with a higher note rate by 0.75%!  This is $250 more per month on a $400,000 mortgage.

This is just a small sample available of rates and products.  Rates are as of Friday, February 29, 2008 at 8:30 a.m. and may change at any time.  Available programs may change at anytime as well.   This is not a guarantee nor is it a commitment of interest rate.  For your personal rate quote or for loan amounts over $650,000, please contact me.